Utah Commercial Real Estate Poised for Continued Strong Growth

Press Release

January 31, 2013

The Cushman & Wakefield | Commerce 2012 Year-End Market Review shows that for Utah, 2012 was a stellar year of continued recovery. The research data reflects a year of stabilization with positive absorption occurring in all commercial real estate product types, suggesting renewed confidence and steady growth going forward.

“The Utah economy has grown at nearly five times the national average and continues to receive honors and accolades for its favorable business environment and economic growth,” said Michael Lawson, CEO of Cushman & Wakefield | Commerce. “The commercial real estate market in Utah has stabilized over the past two years, but with vacancy rates leveling out, a dramatic increase in construction activity and a jump in investment sales, the data is pointing to an even stronger year in 2013.”

The Utah investment market is indicative of the state’s growth. The report shows investment sales totaled at more than $800 million. This level of sales volume represents a 27 percent increase over 2011 and is within a range that is consistent with Utah’s historical average. The report shows the office market experienced the most dramatic increase in investment volume in 2012, ending the year at just over $200 million, a 73 percent increase over 2011. Not only were sales up, but the average transaction per square foot increased by 28 percent. Looking forward, more relatively liberal lending standards during 2013 should continue to help investors acquire new properties as interest rates are expected to remain low through the next 18 to 24 months.

Office Markets

While the office market in Salt Lake County saw an increase of one percent, from 13.8 to 14.8, primarily due to new construction, the Salt Lake market ended the year with 161,785 square feet of positive absorption, even with a negative absorption in the downtown area.

Utah County added nearly 8,000 new jobs in 2012 and the Utah County office market remains one of the strongest areas of the state. The overall vacancy rate was 14.5, but the South and Orem submarkets had the lowest vacancy rates at 8.2 percent and 9.6 percent respectively.

Weber County saw significant action in the office market and experienced a drop in office vacancy rates from 21.9 percent in 2011 to 14.7 percent at year-end in 2012.

With new construction projects announced or underway, Davis County will see an increase in vacancy rates, which currently stand at 24 percent.

Washington County saw an improvement in all sectors, with the medical office sector being the brightest spot with two new projects announced to begin construction in 2013.

After several years of no new construction, the Park City office market saw two new buildings completed in 2012, which included nearly 100,000 square feet of class A space with nearly two-thirds leased or committed to.

Industrial Markets

Vacancy rates in the industrial market trended downward to an overall rate of 9 percent in Salt Lake County. Vigorous construction activity continued and more than tripled the 2010 low of nearly 2 million square feet. The data shows that market activity will continue to increase through 2013 and beyond for both leasing and sales with prices trending upward.

Utah County saw 1.4 million square feet of new industrial space and the market absorbed 1.1 million square feet. The vacancy rate rose less than a percentage point to 8.4 percent overall, but the Orem and Provo submarkets remain very tight with vacancy rates at or below 3 percent.

The strongest market sector for Weber County is the industrial market with low vacancy rates in all building sizes.

Compared to last year at this time, the overall vacancy rate in Davis County has dropped from 5.7 percent to just 4.6 percent and lease rates remain stable.

Washington County saw a strong performance in the industrial space with positive absorption, increasing lease rates and declining vacancies, which stand at 7.8 percent, which is down from 10.2 percent the previous year.

The Summit County industrial market has quietly strengthened through 2012 seeing a decrease of 2.1 percentage points, ending 2012 with a vacancy rate of just 5.5 percent.

Retail Markets

In 2012, the Salt Lake retail market returned to growth mode. While lease rates softened, activity remained strong and the area saw several new national retailers entered the market.

Retail in Utah County posted improved vacancy numbers of 8.2 percent, compared to 11.8 percent in 2011. The hottest area is North Utah County with the addition of a new 250,000-square-foot shopping center at Traverse Mountain.

Weber County retail vacancy rates are down from 18.4 percent in 2011 to 16.5 percent in 2012. Lease rates have remained stable and with only a few new projects announced continued recovery is expected into the next year with increased absorption in existing projects.

Davis County retail is experiencing a modest recovery with an overall vacancy rate, which is down from 11.4 percent to 10.9 percent.

With a drop in vacancies to 6.5 percent in 2012, retail tenants in Washington County are scrambling to find space and lock in current lease rates.

The Park City retail market has declined slightly with vacancy rates increasing by 1.1 percentage points, ending the year at 11.2 percent.